Perry Inc and Dally Company Entered into an Exchange of Real

question 48

Multiple Choice

Perry Inc. and Dally Company entered into an exchange of real property. Here is the information for the properties to be exchanged. $$\begin{array} { l r r } & \text { Perry } & \text { Dally } \\\text { FMV } & \mathbf { \$ 5 0 0 , 0 0 0 } & \mathbf { \$ 5 3 0 , 0 0 0 } \\\text { Adjusted tax basis } & \mathbf { 4 1 0 , 0 0 0 } & \mathbf { 2 8 3 , 0 0 0 } \\\text { Mortgage } & \mathbf { 7 0 , 0 0 0 } & \mathbf { 1 0 0 , 0 0 0 }\end{array}$$ Pursuant to the exchange, Perry assumed the mortgage on the Dally property, and Dally assumed the mortgage on the Perry property. Compute Dally's gain recognized on the exchange and its tax basis in the property received from Perry.

• A) $30,000 gain recognized; $313,000 basis in the Perry property
• B) 100,000 gain recognized; $383,000 basis in the Perry property
• C) $30,000 gain recognized; $283,000 basis in the Perry property
• D) None of the above

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Definitions:

Financial Statement

A report in written form that provides a quantitative analysis of a corporation's financial status, encompassing the balance sheet, income statement, and cash flow statement.

Temporary/Permanent

In accounting, this distinction refers to how certain accounts (temporary) close at the end of a fiscal period, while others (permanent) carry their balances forward.

Account Balance

The difference between the debits and credits recorded in an account.

Financial Statement

A precise documentation of monetary activities and the financial state of a corporation, a person, or another entity.